Petrol and diesel drivers to 'pay big time' in new tax pitfall costing £345

The new Labour Government will announce its Autumn Budget in October with cost cutting and revenue making measures essential after they revealed a £22 billion "black hole" in the public purse.

With the Treasury receiving less in road tax and fuel duty due to electric vehicles, it's thought the Government is likely to take aim at petrol and diesel car owners.

This could include a 'pay per mile' style of tax, or ending the cut on fuel duty.

Howard Cox, founder of the petrol and diesel pricing campaign group FairFuelUK, told the Daily Express: "Fuel taxes will be hiked through policies dressed up to save the planet. Not my words, but those eagerly imparted to me six weeks or so ago by a seasoned Labour MP."

He added: "Now, if you drive a petrol car and, much more worryingly, a diesel vehicle, Labour will make you pay, and pay big time."

Fuel duty is the tax motorists pay on petrol and diesel, as well as other fossil fuels used to heat homes and power vehicles.

Read more: Average Cost to Run a Car UK

Fuel duty has been held at 57.95 pence per litre of petrol and diesel since 2011. The previous Government also imposed a temporary cut of 5 pence in 2022, which was extended until the end of the 2024/25 tax year.

However Chancellor Rachel Reeves could decide to reverse the cut, which was originally in reaction to the war in Ukraine which sent energy prices rocketing.

In fact, many believe she could ramp up the duty by 10p, rising from 53p to 63p a litre.

This would raise £5.5bn according to financial firm Evelyn Partners - a quarter of the alleged black hole.

But it would cause the average driver with a 50 litre car, such as a Mini, to spend an extra £260 a year if they refill it every week, RAC figures suggest.

With an average car holding 50-60 litres of fuel, families with a 55 litre car would be spending an extra £345 a year after fuel duty and VAT is imposed, Evelyn Partners say.

Jayne Harrold, tax partner at Evelyn Partners, said: “Fuel duty raised £24.4bn for the Government in the period from 1 July 2023 to 30 June 2024. With the uptake of electric vehicles, fuel duty receipts are declining and will continue to do so. Addressing the looming funding gap with a new solution will be critical for the Government to keep public finances in good shape.”

However, Labour could soften the blow by cracking down on supermarkets who fail to pass on wholesale cost savings to customers.

NimbleFins previously reported how the Competition and Markets Authority was granted more powers to scrutinise fuel prices and report malpractice after finding supermarkets had widened their profit margins during the cost of living crisis.

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